credit and debt issues for military families
TRANSCRIPT
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https://learn.extension.org/events/2582
Credit & Debt Issues for Military Families
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Connecting military family service providers and Cooperative Extension professionals to research
and to each other through engaging online learning opportunities
www.extension.org/militaryfamilies
MFLN Intro
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Leslie Tayne● Consumer and business debt-
related attorney and advisor.● Founded Tayne Law Group, P.C.,
concentrating solely in debt resolution and alternatives to filing bankruptcy for consumers, small business owners and professionals.
● Tayne Law regularly consults and advises on debt management related issues.
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CREDIT & DEBT ISSUES FOR
MILITARY FAMILIES
Leslie H. Tayne, Esq. www.taynelaw.com
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THE DIFFERENCE BETWEEN GOOD DEBT & BAD DEBT
• Everyone has debt. Many will be faced with debt at some point in their lives (i.e. mortgage, credit card, student loans, etc.)
• Before taking on any kind of debt, you may want to consider determining if this debt will have a positive or negative effect on your financial situation.
• Good debt is any debt you acquire with the ability to pay back for the term of the loan.
All debt is good debt until it becomes unmanageable!
www.taynelaw.com
GOOD DEBTTaking out a car loan.If you need to take out a loan for a car and you have a steady income, good credit and have the ability to pay the monthly payments, then this is good debt.
Taking out a student loan.Student loan debt isn’t a bad thing. It helps you get the education you need! But it is important to be responsible and make sure you pay these loans every month and on time to stay in the “good debt” category.
Taking a loan from your parents and not paying them back.If your parents gave you a loan with a term and “pay back conversation,” and they are hounding you for money, then this is considered bad debt.
High credit card debt.If you have 3 credit cards that are all close to the limit or maxed out, then this is considered bad debt.
BAD DEBT
www.taynelaw.com
HOW TO PAY OFF DEBT• Practice money management skills. Rework your budget
(or create one). Sign up for an online budgeting tool to help you. Take a good look at your budget and see what expenses are eating up your income. If there are a lot of frivolous expenses, such as subscriptions you don’t need, morning coffee runs, and takeout lunches, cut these types of expenses out and start allocating that money towards paying off debt. We will talk about this more in detail in the presentation later on in the presentation.
• Have an Emergency Fund/Savings Account• Set financial limits with your children • Pay more than the minimum on your credit cards (consider
bi-weekly payments)• If all else fails, speak to a professional (i.e. financial
advisory or attorney)www.taynelaw.com
STRATEGIES FOR MILITARY FAMILIES TO OVERCOME DEBT
1. How to minimize your debt2. Utilize discounts and hunt down freebies3. Look for everyday savings4. Consider a side hustle
The next few slides will break these down…www.taynelaw.com
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HOW TO MINIMIZE YOUR DEBT
In efforts to minimize your debt, it’s important to:• Organize all personal finances. You can do this by
tracking and categorizing your spending, income, assets, and all debts.
• Create a budget that fits your needs based on your personal finances and spending habits
• A budget will help you track spending and see where you can cut back. This should free up cash so you can start paying down your debt.
• Focus on paying off debt with the highest interest rates. This will save you more money in the long run!
• Pay extra whenever possible• Refrain from adding more debt
www.taynelaw.com
UTILIZE DISCOUNTS AND HUNT DOWN FREEBIES
• Hundreds of companies offer deals for military families in a variety of categories such as school supplies, clothing, cars, electronics, fitness, entertainment, healthcare benefits, education, and other professional services
• Consider calling services you already use to see if they have any military discounts (i.e. utility and insurance companies). These service companies may offer a discounted price to join as well as membership rewards.
• Some stores may not advertise their military discount so it’s always worth asking!
www.taynelaw.com
LOOK FOR EVERYDAY SAVINGS
Everyday savings are out there, you just need to know where to look!
Store Emails: Sign up at places you frequently visit. They will notify you with current sales and discounts exclusively for their subscribers.Social Media: “Follow” or “Like” the pages of stores you shop as they may announce sales you may not see elsewhere.Newspapers & Magazines: Don’t forget there are many deals to be found here!Coupon sites: Use these sites for everyday savings (i.e. Coupons.com, Moneysavingmom.com, Yipit.com, RetailMeNot.com, DealNews.com)Other savings sites: Groupon.com (Savings on just about everything), Airbnb (save on hotels by “renting” rooms or homes), GasBuddy (search for best gas prices), Goldstar.com (save on sporting events, concerts, and theater), and MyMilitarySavings.com (Coupon site designed specifically for military families)www.taynelaw.com
CONSIDER A SIDE HUSTLEA side hustle is a great option for spouses looking to make extra income.
• You can work close to home or even at home• Build income doing something you enjoy to help
you pay down debt and build an emergency fund• You may be able to be your own boss and work
at your own paceBuilding the perfect side hustle:
• What side job is going to work for you? Think about your hobbies, interests, and talents, and how much time you have to put aside each day/week.
• Determine your target market and how to reach them. Utilize free resources such as social media.
• Talk to others who have a side hustle to see if they can help you get startedwww.taynelaw.com
BUDGETING TIPS FOR MILITARY FAMILIES
1. How to set up a budget2. Track your spending/cut costs3. Set up an emergency fund4. Sign up for automatic payments5. End the paycheck-to-paycheck lifestyle6. Take advantage of military benefits
The next few slides will break these down…
www.taynelaw.com
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HOW TO SET UP A BUDGETBudgets have only one rule: Do not go over budget!
Know how much net income you earn each month (net means your take home pay after taxes, social security, insurance, etc.)
Create a detailed list of money going out (expenses) – put them into 3 separate categories: fixed, variable, and discretionary. • Fixed includes set amounts per month (i.e. mortgage, car payments, cable,
phone, etc.) • Variable expenses can change depending on needs (i.e. food, gas, toiletries,
medication)• Discretionary is elective spending (lifestyle choices we enjoy – i.e. eating out,
vacation)• Track your spending and cut costs if you have to!
• Stay motivated!
• Set Goals!
• Continue to adjust your budget every couple months.
www.taynelaw.com
GENERAL GUIDELINE FOR MONTHLY EXPENSES• 3% medical – co-pays, prescriptions and personal such
as beauty and hygiene• 30% housing – mortgage, utilities, insurance• 20% debt – credit cards, loans• 15% food – groceries, eating out• 15% transportation – car payment, gas, insurance,
repairs• 10% savings – retirement fund, “what if” fund,
emergency fund• 7% misc. – entertainment, clothing, extras
www.taynelaw.com
WHEN TO BUDGETThe beauty of budgeting is you can choose the time that works best for you.
• Choose a calm and comfortable environment – Weekends in the morning, before any “big” activities, at night, at the office on your lunch break
• Budgeting may be viable at certain times in your life: large expenses such as a wedding, coming home from deployment. Start your budget when your income and expenses are more stable so you have a better idea of actual numbers
www.taynelaw.com
NEED HELP BUDGETING?
Budget JewelOur online, on-the-go interactive tool provides a realistic perspective on personal finances with an easy-to-use format for establishing and maintaining a practical budget. No bank information is required, it’s printable and downloadable, and it’s completely confidential.
www.budgetjewel.com FREE 30 day trial – BUDGET123 Budgetjewel.c
om
SET UP AN EMERGENCY FUNDAn emergency fund is a smart and easy way to make sure you can afford unexpected expenses that may not already be covered in your budget. They also provide an alternative to relying on credit cards, personal loans, and other forms of debt.
• Calculate how much you can contribute. Depending on how much room you have in your budget, the amount of money you can contribute to your emergency fund may vary.
• Ideally, try and contribute 10% of your net income to your emergency fund until it’s complete you have at least 3-6 months worth of living expenses saved.
• This will help you avoid debt since you will have a back-up plan for life’s unexpected twists and turns, such as medical or vet expenses, or car maintenance.
www.taynelaw.com
SIGN UP FOR AUTOMATIC PAYMENTS
• If you have a personal or student loan, signing up for automatic payments can help you reduce your debt. Automatic payments sometimes offer you discounts on interest rates. For example, Wells Fargo and Sallie Mae offer .25% discount on interest rates if you enroll with their automatic payment plan.
• Automatic payments will also help you stay on top of your payments and ensure they are always on time. Make sure to still keep track of them even though they automatically come out of your account each month.
www.taynelaw.com
TAKE ADVANTAGE OF MILITARY BENEFITS
Navy Federal Credit Union
https://www.navyfederal.org/
The Navy Federal Credit Union can help you set up:• Your first checking account• IRAs• Student Loans, personal loans • Prepaid cards• Member exclusive offers and discounts - Car Rentals, Auto insurance• Convenient banking – Online Banking• Advice and planning • Job help
www.taynelaw.com
TAKE ADVANTAGE OF MILITARY BENEFITS (CONT‘D)Military Lending Act: Under the Military Lending Act, if you’re an active duty member of the armed forces or are on active Guard or Reserve duty, you can’t be charged an interest rate higher than 36% on some types of consumer loans (consumerfinance.gov)
• Rights under MLA include: • 36% interest cap – interest, fees, credit card charges, credit
renewal charges, credit insurance premiums, other fees for credit-related products sold in connection with the loan
• Written and Oral Disclosure – Before a loan is issued, creditors must inform you in writing and orally the fees and interest rates of the loan
• No roll-over loans – Creditor can’t refinance the same loan unless it favors you, that way you won’t get stuck with a loan that gets more expensive to pay back every few months
www.taynelaw.com
TAKE ADVANTAGE OF MILITARY BENEFITS
(CONT’D)Other Rights under MLA include: • No mandatory waivers or consumer protection laws
– “Creditors cannot require you to waive any state or federal law, including the Servicemembers Civil Relief Act, which protects servicemembers from being sued while on active duty (consumerfinance.gov).”
• No mandatory arbitration – When an outside party decides how a dispute should be resolved
• No mandatory allotment – Creditor can’t require you to take an allotment out for your loan. This is an automatic payment taken out of your paycheck to pay off a loan
• No prepayment penalty – A creditor can’t charge you a fee or penalty if you decide to pay off your loan earlywww.taynelaw.com
STRATEGIES FOR OVERSEAS DEPLOYMENT, MILITARY PERSONNEL
1. How to manage your money during overseas deployment
2. How to manage your money when moving all the time
3. How to transition financially to civilian life
4. Should you buy a home?5. How to take advantage of your
career
The next few slides will break these down…
www.taynelaw.com
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HOW TO MANAGE YOUR MONEY DURING OVERSEAS
DEPLOYMENTBefore Deployment
Put someone in charge: Designate someone to oversee finances while military spouse is awayNo new debts: Avoid incurring any major new debts before you deployCome up with a plan and prepare: Discuss finances with spouse before deployment, what debt will you pay off first, second, so onSet up Direct Deposit: Automatically deposit wages to your bank or credit unionAutomate finances: Set up automatic bill pay to avoid late payments. This will make managing your finances a bit easier.Stick with your emergency fund: An emergency fund can be a great source of cash when you’re hit with a surprise. With extra cash stored away for emergencies, you limit the need to rely on credit cards which can lead to debt. Consider saving 3-6 months of expenses.
www.taynelaw.com
During Deployment
Take advantage of Department of Defense savings plans.
Thrift Savings Plan: A retirement savings plan for military personnel and federal employees that is similar to a 401k plan. Like a 401k you can invest your money after taxes (Roth) or pre-taxed (Traditional). With many investment options and low management fees, TSP may work for many families.Saving Deposit Program: Unlike a TSP, a SDP is only available during combat deployment.
• Personnel needs to be serving in a combat zone or qualified area outside the US for more than 30 consecutive days or 1 day in each of three consecutive months
• You can deposit up to $10,000 for each deployment• Earn 10% annual interest during deployment (this is
taxable)• Earn 10% interest up to 90 days after military
personnel returns homewww.taynelaw.com
During Deployment (cont’d)
Stick to your pre-deployment budget: If you’re receiving deployment benefits or an increase in income, it’s important to save and reserve these extra funds. Sticking to a pre-deployment budget can help the temptations to spend this extra money on lifestyle inflation.
Don’t be afraid to ask for help: If you are struggling to make payments and falling behind, ask for help as financial assistance may be available from these organizations:
• Air Force Aid Society• Army Emergency Relief• Coast Guard Mutual Assistance• Navy-Marine Corps Relief Society• Servicemembers Civil Relief Act: SCRA can provide
protection against outstanding mortgage and credit card debt, taxes, and even eviction prevention as well as many other protections
www.taynelaw.com
Post-Deployment
When a spouse returns from home its important to communicate financial affairs.
• Financial protections such as SCRA and SDP will soon expire so communicating and understanding what needs to be done next is crucial.
• Just as a financial plan was developed before deployment, a post deployment plan is just as important.
Don’t overspend.• A returning spouse may be tempted to spend the
money they earned during their deployment. Consider spending money wisely and make smart financial decisions such as adding money to your Thrift Saving Plan and paying off any debt incurred.
www.taynelaw.com
HOW TO MANAGE YOUR MONEY WHEN
ALWAYS ON THE MOVESince military families are always on the move, it can not only be costly, but it can be a hassle. With proper planning you can limit some stress.
Consider tracking all your financial accounts and see how a move will affect them:
• Will accounts need to be closed or can you simply ask to change your address? (i.e. if you use a local bank, will you need to close your account and open a new one at a bank near your new home?)
• Your credit card companies will need to be notified of your address change
• Pay off and close your local accounts such as your utility billsCreate a moving budget:
• Understand what the military will cover and what you should budget for
• Your budget should include moving company costs and/or truck rental, gas, storage facilities, extra insurance on items of high importance to you, lodging (if needed), as well as all real estate and lawyer fees
www.taynelaw.com
Know what the military will help you with.
Dislocation Allowance: Service members and their families will receive a partial reimbursement for expenses incurred during a PCS move. The allowance amount is based on the service member’s rank and family status.
Monetary Allowance in Lieu of Transportation: MALT is a mileage reimbursement service members can receive when they drive to their new duty station. Amount reimbursed depends of type of transportation (car, plane, motorcycle, etc.)
Per Diem Allowance: Reimburses service members and their families for costs of meals and lodging when traveling to new station. Amount reimbursed depends on size of family and age of children.
Advanced Basic Pay: This lets military personnel take up to three months’ pay in advance interest free when you make a change of station. This money is a loan to help pay for moving expenses and will need to be paid back.
www.taynelaw.com
Manage your budget after your move.
• It can be tempting when you move into a new place to want to buy new furniture and accessories for your home. Prioritize what needs to be purchased now and what can wait. This can reduce overspending.
• If mortgage payments and property taxes are higher than previously, be sure to factor this into your new budget
• Talk to local sources about your new neighborhood. Ask for any information regarding inexpensive shopping and entertainment.
• Limit eating out until your major moving purchases are paid off. Avoid racking up debt by eating at home.
• Research cost of utilities before you move so you have an idea of what they will cost you each month
• Your budget doesn’t need to be set in stone. You may need to adjust it as you settle in.
www.taynelaw.com
HOW TO TRANSITION FINANCIALLY TO
CIVILIAN LIFEMake sure you’ve saved enough. Your emergency fund (or transition fund) should be large enough to cover 3-6 months worth of expenses. This fund can keep you afloat while you search for a job.Revise your budget as necessary. Transition to civilian life can mean you may no longer receive certain benefits. It’s important to budget for new expenses.Manage your Thrift Savings Plan. Your military retirement fund can remain in a TSP account or can be rolled over to a Roth/Traditional IRA or your new employer’s plan.Take advantage of Separation Assistance. Personnel can deduct some of the costs they incur searching for a new profession, including travel, fees for resume preparation, and outplacement services.
www.taynelaw.com
HOW TO TRANSITION FINANCIALLY TO
CIVILIAN LIFEApplying for civilian jobs:• Consider connecting with a recruiter whose focus is
military-to-civilian transitions• Attend a Transition Assistance Program (TAP), a
workshop created to teach veterans job search strategies and prepare for interviews
• Showcase your strengths as a military candidate• Negotiate your salary. Don’t leave money on the table!
www.taynelaw.com
SHOULD YOU BUY A HOME?
Buying a home is a large investment and since military families move frequently, there are many factors to consider:• How long will you be staying in your location? A
Permanent Change of Station (PCS) can move you to a new location numerous times. If you’re moving often, would renting be a wiser decision for you?
• Will a home purchase be an investment? If you purchase a home and are soon uprooted, will you experience a loss on your investment? On top of closing costs, there are many other hidden fees associated with purchasing a home.
• Will purchasing a home limit you from saving money? With a mortgage, taxes, and other expenses that come with a home, will you still be able to save?
• Can you afford the maintenance? Will you have the time and money to manage the upkeep on the home?
www.taynelaw.com
If you are considering purchasing a home…
• Look for a home you can comfortably afford• Apply for a VA Loan and take advantage of their benefits:
• No down payment required• Unlike conventional mortgages, a VA does not require
Private Mortgage Insurance (PMI) which can save you hundreds
• Since the federal government backs each VA Loan, interest rates are low
• No pre-payment penalty• Like an emergency or transition fund, consider a fund where
you can save money for closing costs, furniture, repairs, etc. • Take advantage of tax deductions – this money can go a long
way!• Take advantage of Basic Allowance for Housing (BAH), a tool
that can give service members a monthly allowance to help cover rent or mortgage payments. The amount varies based on your location and rank.www.taynelaw.com
BUYING VS. RENTINGBenefits of Buying:• Homeowners can deduct
mortgage and property tax payments
• If your home appreciates in value, the sale of your home can mean financial gain
• Ability to personalize your home to your liking
• VA Loans can help make home ownership a bit easier
Benefits of Renting:• Military Clause allows military
personnel out of leases• Landlord is usually in charge
of maintaining property• While selling a home can be a
long and difficult process, moving while renting can be much easier
• Monthly rent is sometimes cheaper than a monthly mortgage
• There’re not as many up-front costs associated with renting
www.taynelaw.com
HOW TO TAKE ADVANTAGE OF YOUR CAREER
A military career can provide you and your family with many benefits to which you should take full advantage of.
Ability to go to school or further your education with financial assistance programs during or after your service.• Tuition Assistance: Can pay up to $250/credit hour up to a total of
$4,500/year• Post 9/11 GI Bill: Receive up to 100% full tuition for public in-state
schools, a monthly housing allowance, up to $1000 a year for books and supplies, and the ability to transfer the benefit to a spouse (if still serving). You have up to 15 years to take advantage of this benefit.
• Montgomery GI Bill: Receive a set monthly rate based on the number of classes you are enrolled in. You have up to 10 years to use this benefit.
• Servicemembers Opportunity Colleges (SOC): The SOC can be beneficial for military scholars who are frequently transferred. The schools associated work together to make it easier to transfer college credits if you need to move due military transfer.
www.taynelaw.com
Take advantage of retirement plans and benefits. • Thrift Savings Plan: Retirement savings plan for military personnel and
federal employees that works similarly to a 401k plan. Like a 401k you can invest your money after taxes (Roth) or pre-taxed (Traditional). With many investment options and low management fees (29 cents/every $1000 invested) TSP may work for many families.
• Saving Deposit Program: Unlike the TSP, the SDP is only available during combat deployment.
• Personnel needs to be serving in a combat zone or qualified area outside the US for more than 30 consecutive days or 1 day for each of three consecutive months.
• You can deposit up to $10,000 for each deployment• Earn 10% annual interest during deployment (This is taxable)• Earn 10% interest up to 90 days after military personnel returns
home.• There’s no fee for stopping your deposits
• Unlike many civilian jobs, military personnel can receive a pension with benefits after 20 years of active duty service. The amount they can receive depends on the retirement program they’re eligible for.
www.taynelaw.com
Access to leave and vacation time.• Active military personnel earn 2.5 days of vacation
time /month for up to 30 paid days off a year. This time can be taken immediately after basic training.
Access to housing and meal allowance. • For active military on base, housing is included in their
compensation package• If married and on-base housing in not available, or you
would like to live off-base, you can receive a tax-free monthly housing allowance
• Active personnel can receive free dining or an allowance to help cover cost of off-base meals.
www.taynelaw.com
Access to special tax breaks.• Members serving in combat zones are exempt from paying
their federal income tax for the month(s) of service. This is a great opportunity for families to save money and help pay down their debt.
• Some members of the military can even postpone some tax deadlines up to 180 days after returning home. This gives you more time to save money to pay taxes.
Take advantage of help offered for expenses.• Help with moving/travel - If a permanent change of station is
required, military personnel are allowed to deduct the moving expenses during tax season. Reservists who are required to move more than 100 miles from home can be reimbursed for their travel expenses
• Uniforms - Some service members can deduct costs of certain uniforms that they are not allowed to wear when off-duty
www.taynelaw.com
STRATEGIES FOR LONG-TIME VETERANS TO OVERCOME DEBTFind a job that’s right for you & take advantage of the
benefits!
www.taynelaw.com
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People at Work in Grocery Store by Minerva Studio
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FIND A JOB THAT’S RIGHT FOR YOU
Take advantage of benefits by enrolling in Military network programs
• Military Job Networks (MJN) is an exclusive online networking platform created and enabled only for verified U.S. Military Veterans. With 3,600 online private military occupation groups, verified Veterans access private, virtual spaces for true peer-to-peer networking and knowledge sharing. www.militaryjobnetworks.com
Networking is a great skill to acquire when applying for jobs and while at your current job. It’s all about connections!
www.taynelaw.com
VA CAREER BENEFITS
Find a VA Recruiter:• You can get help with a job position and health care
benefits at http://www.vacareers.va.gov/ • You can also look for careers at http://vaforvets.va.gov/.
The Veteran Employment Services Office (VESO) is a strategic program management office that provides employment and career management resources designed to attract, retain and support Veteran employees at VA and across the federal government, including those serving in the National Guard and Reserve.
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QUESTIONS?
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No part of the book Life & Debt may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording, or any other information storage and retrieval system, except for brief excerpts in a review or essay referring to this book, without prior permission in writing from the publisher.
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